There are different initiatives by the Canadian government to ease the burden of tax on citizens. These programs come in different forms (refundable or non-refundable), eligibility requirements, refundable tax percentages, etc. One of them is the Canada Training Credit.
For the refundable tax credits, once you are eligible, the CRA or provincial government will send you a refund for the difference in the amount of the credit that is larger than the tax you owe.
As mentioned above, there are tons of refundable tax credit programs; however, this article will be reviewing Canada Training Credit.
Canada Training Credit Meaning
The Canada Training Credit is a refundable tax credit by the CRA designed to help Canadians ease the cost of training fees. This tax credit is available only for eligible tuition and other fees paid for courses taken in 2020 and subsequent tax years. In addition, the tax credit is fixed to accumulate at a rate of CA$250 yearly, up to a lifetime training amount limit of CA$5,000.
Eligible persons can use the credit to claim a refundable tax credit for half of the eligible tuition and fees for undergoing a course or enrolling in a training program. However, every individual has a training amount limit. The CRA usually includes this limit in the information they send you yearly.
Canada Training Credit Eligibility Requirement
You must meet the following requirements before you can be eligible for the Canada training credit:
- Be a worker
- Have an average of CA$1,000 in earnings – including maternity or parental leave benefits
- Be between the ages of 25 and 64
- Have an income below CA$150,000
Eligible Tuition and Fees
Below are some of the eligible tuition and fees you can get a tax refund on using the Canada Training Canada:
- Tuition fees
- Examination fees.
- Supplementary fees such as admission fees, exemption fees for a certificate, diploma, or degree
How to Accumulate Credit towards your Limit
Once you are eligible for this credit, you can start accumulating CA$250 yearly towards your Canada training credit limit to a maximum of CA$5,000. However, to start accumulating credit, you must meet the following requirements:
- Be at least 26 years old or less than 66 years old in the tax year.
- File a tax return for the year
- Have an individual annual income for the year that does not exceed the top of the third tax bracket in that year
- Be a Canadian resident all through the year.
- Have a total of CA$10,0000 or more from incomes such as maternity and parental benefits, working income from an office or employment, business income, taxable part of scholarship income and research grants, tax-exempt earnings of status Indians and emergency service volunteers, and income under the Wage Earner Protection Program Act.
Claiming Canada Training Credit
Once you meet all eligibility requirements, you can lay claims to the Canada training credit, starting with your 2020 income tax and benefit return. Note that this claim applies only to eligible tuition and fees paid for courses taken in 2020. Hence if you want to claim the Canada training credit in a given tax year, you must meet all conditions. These conditions are:
- Be a Canadian resident all through the year.
- You paid your tuition or fees to an eligible educational institution in respect of the year.
- File an income tax and benefit return for the taxation year
- Have a Canada training limit for the year that is over zero
- You have eligible tuition and fees for the existing tuition tax credit
The Canada training credit on your income tax and benefit return will reduce the tax you are owing. However, the CRA will send a refund for the difference if the credit you claim is more than the tax you are owing.
Note that you cannot lay claim to the credit below age 26 or above 65. If you are within the age bracket mentioned above, your credit limit will be zero. In addition, any unused Canada training credit limit you have will expire, and there will be no extra funds that will accumulate for use in subsequent years at the end of the year you turn 65.
Calculating Canada Training Credit
To get the amount of Canada Training Credit you will be eligible for, you will need to calculate:
- Your Canada training credit limit for the tax year
- Half of the eligible tuition and fees you paid that year
Note that the amount you can claim in a year must be lesser than 50% of your eligible tuition for the year and your Canada training credit limit.
For instance, MaryAnne has a credit limit of CA$250 accumulated training credit and CA$5,000 eligible tuition fees for the year. In that case, she will claim CA$250 since it is a lesser amount between her accumulated Canada training credit limit and CA2,500, which is 50% of her CA$5,000 tuition fees.
You can check your accumulated Canada training credit on your previous year’s notice of assessment in the same light. Alternatively, it is available in your CRA My Account.
Claiming Existing Tuition Tax Credit
If you have any existing tuition tax credit, you can claim it. However, CRA will lessen the tuition amount you receive by the amount of the Canada training credit you claim. For instance, Tom’s tuition amount is CA$8,000, and he claims CA$250 for the Canada training credit.
To calculate his tuition tax credit, he will deduct his total tuition amount from the amount he claimed. That is CA$8,000 – CA$250 = CA$7,750. In this case, the amount of tuition the CRA will use in calculating the tuition tax credit will be CA$7,750. Also, you can add any unused tuition credit, if any.
Transferring Unused Canada Training Credit Limit
With Canada training credit, you cannot transfer any unused limit to a beneficiary, whether dependent or common-law spouse. However, you can carry forward or transfer any unused eligible tuition fees and expenses to a spouse/common-law partner or dependent for Tuition Tax Credit.
Summarily, as a refundable tax credit, the Canada Training Credit help eligible persons lessen tax on tuition and other fees paid for courses taken in 2020 and subsequent taxation years.
Although this initiative is still new, it already has eligibility requirements and processes people must follow to lay claims. Nonetheless, it is advisable to go through the process carefully before filing a claim.